When do taxable investments make sense?

[sad]

@goaztecs It's not doing nothing, it's shielding you from taking on an interest bearing loan for a short term emergency.

Think of it as insurance. You pay a lot for insurance and hope you don't have to use it. Same with the e-fund. Necessary evil

 

[goaztecs]

@sad I mean the short term loan cost $16 so it wasn’t exactly painful. Merely pointing out another way to look at using a taxable account and another way to access your money without having a large portion sitting in cash or cash equivalent.

 

[takeonme]

@goaztecs At least for now, it’s making 5% so I’m good with that until rates go down. But point taken!

 

[ayomonu]

@takeonme After you have maxed contributions to your tax advantaged accounts.

 

[oceanskk]

@takeonme If you hold US stocks long-term and your income isn’t too high then your taxes could be nearly zero or zero. Qualified dividends and long term capital gains have quite low tax rates.

 

[takeonme]

@oceanskk How high is “too high”? I’ll look into this!

 

[oceanskk]

@takeonme For 2024, long term capital gains and qualified dividends are taxed at 0% if your taxable income is below $47025.

 

[takeonme]

@oceanskk Okay, yeah, I'm well above that. I do see though that the taxes would still be lower than regular income on long-term gains regardless. I do need to figure out what makes a dividend "qualified" or not.

 

[jeromegenta123]

@takeonme Most dividends from US companies are qualified. REIT dividends aren't though.

 

[missmama]

@takeonme Taxable investments make sense when, assuming all other things equal, the alternative is investment returns are less than or equal to the original principle. In other words, I'd rather make $100 on an investment and taxed $99 than make $0 on an investment and taxed $0. Net $1 vs. net $0.

 

[takeonme]

@missmama I get what you’re saying in theory, but what does this look like in practice? Presumably, I’d be investing the same thing, just deciding between a tax advantaged account versus not.